Barlow Company manufactures three products: A, B, and C. The selling price, vari
ID: 2458612 • Letter: B
Question
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow:
Product
360
The same raw material is used in all three products. Barlow Company has only 4,400 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier’s plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $8 per pound.
Product
A B C Selling price $ 240 $360
$ 320 Variable expenses: Direct materials 24 72 32 Other variable expenses 120 108 176 Total variable expenses 144 180 208 Contribution margin $ 96 $ 180 $ 112 Contribution margin ratio 40 % 50 % 35 %Explanation / Answer
A B C Contribution margin per unit 96 180 112 Direct Material Cost per unit (A) 24 72 32 Direct Material Cost per pound (B') 8 8 8 Pound of material required per unit (C = A/B) 3 9 4 2a) A B C Contribution margin per pound (A) 32 20 28 Pounds of material available (B) 4400 0 0 Total conribution margin ( A*B) 140800 0 0 As there is no limitation on production and sales, The entire raw material availabe should be used in producing Product A , as product A has the maximum contribution per pound of raw material. By using all the raw material available in prodcing Product A , the company will maximise its profit
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.